Improving Project Management in the Department of Energy (1999) / Chapter Skim
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4 Acquisition and Contracting
4 Acquisition and Contracting
Pages 57-70
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From page 57... ...
In fact, GAO continues to designate DOE contracting as a high-risk area vulnerable to waste, fraud, abuse, and mismanagement. GAO has repeatedly found that DOE enters into contracts with little or no competition, reimburses contractor costs uncritically, and is lax in overseeing contractors (see, for example, GAO, 1997a, 1997b)
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From page 58... ...
The M&O contract typically contained a very general work scope under which the government reimbursed essentially all contractor costs and paid an additional fee based either on a fixed fee schedule or an incentive fee based on achieving contract goals, such as production of a specified quantity of a specified product. The M&O contract approach provided flexibility in a rapidly changing technological and geopolitical environment.
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From page 59... ...
Various contract methods are available to DOE, and the selection of the most suitable contracting approach is critical for effective and efficient project delivery. Some of these contracting methods are unique to DOE, while others are common federal acquisition practices.
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From page 60... ...
For example, fixedprice contracts are generally inappropriate for work involving major uncertainties, such as work involving a new technology, poorly characterized waste and site conditions, or open-ended work scopes. Fixed-price contracts may be more difficult to reconcile with accelerating project development through the use of design-build approaches.
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From page 61... ...
Because private firms are risk averse, in major privatization projects it is common for them to form consortia to spread the risks over several companies. In the case of DOE, "DOE's privatization strategy relies on the use of competitively awarded fixed-price performance contracts through which DOE purchases waste cleanup services from private contractors.
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From page 62... ...
. DOE's other recent experiences with privatization include the Idaho Advanced Mixed Waste Treatment Project, Oak Ridge Transuranic Waste Treatment, and Transuranic Waste Transportation in Carlsbad, New Mexico.
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From page 63... ...
Mismatching is likely to result in cost and schedule overruns. CONTRACT REFORM Following the report of the Contract Reform Team, the secretary of energy in 1994 initiated a broad program of contract reform that included the following elements: increased competition cost reduction increased use of fixed-price contracts increased contractor liability performance criteria and measures performance-based incentives results-oriented statements of work The contract reform placed great emphasis on the use of performance-based contracts, under which contractors would be evaluated against objective performance measures, and incentive fees would be used to reward excellent performance.
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From page 64... ...
An obstacle to contract reform has been that DOE and contractor personnel are not familiar with the new management and contracting approaches. An indepth knowledge of procurement and contract-management techniques is essential to the successful implementation of reform measures, and the training of DOE and contractor employees, including source selection officials and members of the source evaluation board, should be a priority.
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From page 65... ...
So as long as each headquarters office, each site, and contractors within sites use different systems, evaluating the efficiency of performance measures throughout DOE is all but impossible. Performance-based incentives should be carefully designed to reward excellent performance and can be used to encourage DOE contractors to accept more risk, when contractor assumption of risk is advantageous to the government.
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From page 66... ...
COMPETITION AND IMPROVED PROJECT PERFORMANCE DOE contracting reform has long been considered a potential source of considerable cost savings for two reasons: (1) DOE contracts for a tremendous amount of work; and (2)
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From page 67... ...
The committee noted several factors that could significantly deter a contractor from bidding on DOE projects: high proposal preparation costs and attendant risks to capital (Fluor Daniel Hanford reportedly spent about $10 million to win the Hanford M&I contract, and unsuccessful bidders spent similar amounts [Hatch, 19981~; the advantages of
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From page 68... ...
DOE has a number of contracts that expire in the next two years that could be extended or reopened to competition, including Rocky Flats Environmental Test Site, Fernald Environmental Management Project, Y- 12 Plant, Kansas City Plant, Waste Isolation Pilot Plant, and the Nevada Operations Office Support. If DOE conducts negotiations before deciding whether to extend or recompute the contracts, there would probably be more competition.
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From page 69... ...
1997a. Audit of the Contractor Incentive Programs at the Rocky Flats Environmental Technology Site.
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From page 70... ...
1998. Project management and project delivery: issues and concerns of DOE contractors, presentation by H
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